Large Screens, Premium Experience

If 2014 proved that exhibitors around the world are betting big on the big screen, 2015 was a testament to the continued proliferation of premium large format (PLF) auditoriums. According to research firm IHS, the number of PLF screens around the world increased by 15.8 percent in the first six months of 2015—from a total of 1,401 screens at the end of 2014 to 1,623 screens by June. That increase stems from continued investment from exhibitors in their own branded PLF formats, as well as a larger competitive landscape that is seeing companies such as Dolby, Barco, and RealD battle for a share of a market that has been dominated by IMAX.

The surge in screen count from the first half of 2015 was followed by a bold decision from a couple of studios to see how a limited opening in PLF formats could impact a film’s theatrical run. It was a strategy that had already been employed in 2011 with Paramount’s Mission: Impossible – Ghost Protocol, giving PLF auditoriums the first crack at a big studio release. The experiment paid off for the Tom Cruise vehicle, generating an opening frame of $13.6 million. Universal’s Everest didn’t hit the same heights when it opened in September, grossing $7.6 million from 545 screens in North America. Sony’s The Walk, however, started off on the wrong foot with a paltry $1.6 million bow from 448 PLF screens in October. Exhibitors’ interest in the big screen experience has hardly floundered despite last year’s lackluster results from an exclusive PLF debut run. North America continues to be the largest market for exhibitor-branded PLF auditoriums, a concept that is being adopted by circuits nationwide regardless of size.

Cinergy Cinemas is a Texas-based exhibitor that operates two locations—with a third scheduled to open in the coming months. Cinergy might not have the screen count or geographic reach of its competitors, but it nevertheless sees PLF as a central factor in retaining a competitive edge in today’s exhibition market. “It literally seemed like a no-brainer to develop our own brand,” explains Jeffery P. Benson, founder and CEO of Cinergy Cinemas, when describing his company’s decision to develop EPIC, their in-house PLF brand. Cinergy uses Dolphin Seating’s Rio Grande seats and VIP Cinema Seating’s Norwood recliners in its EPIC locations, along with Dolby Atmos immersive audio, Volfoni 3D, and Christie Digital 4K projection. “We plan to have at least one EPIC screen in each new complex. Given the fact that there is almost always a tentpole release out in our theaters, for the biggest movie fans, a PLF screen offers the ultimate viewing experience and there are plenty of people willing to pay the modest up-charge for the higher-end experience.”

Kevin Mitchell, president and CEO of Showbiz Cinemas, another Texas-based exhibitor, operating 96 screens in six locations, also sees PLF as an integral part of an exhibitor’s growth strategy. Showbiz currently has three of its SDX PLF auditoriums open to the public, with plans of opening an additional two to three per year. “It’s not about any one particular thing, it’s about the whole package,” cites Mitchell as the secret to success with an exhibitor-branded PLF offering. “I think the environment is getting so competitive with home theaters that you really need to give people a reason to leave their homes. And it’s not just about the equipment—it’s about doing it in an affordable environment and a clean atmosphere.”

Mitchell’s observations hit the mark, which is exactly why these auditoriums are about so much more than the bigger screen. Luxury seating, immersive audio, and top-of-the-line projection are commonplace approaches to the concept. They can also allow exhibitors to test out new features, as occurred when Goodrich Quality Theatres adopted reserved seating in its Saginaw, Michigan, GDX location. The positive consumer reaction to reserved seats influenced the company’s decision to offer the service at additional sites and has already helped establish the popularity of GDX among its audience. Goodrich entered 2016 with seven GDX screens in Michigan and Indiana and plans to add another four auditoriums in Indiana, Illinois, and Florida this year.

B&B Theatres, an early adopter of exhibitor-branded PLF, unveiled its first B&B Grand Screen location in a suburb of St. Louis back in 2010. They went back to that same auditorium in 2014 to install recliner seating. “We were excited about the reaction from customers, but we also learned a lot about screen size, ratios, viewing angles and ideas on how to improve and enhance the PLF experience,” recalls Brock Bagby, director of programming and business development. “Customers’ reactions have been extremely positive. They seek out our B&B Grand Screens especially on event titles. We are even finding in some cases customers prefer to only see movies on our B&B Grand Screens, which is why we try to show as much variety as possible. Depending on the movie, we are seeing 40 to 60 percent of the gross coming out of our B&B Grand Screens. In some cases we’ve opened a movie on six screens, and even in those instances we still find 40-plus percent of the gross coming out of the B&B Grand Screen. Due to the demand we recently opened a theater with two Grand Screens.”

One of the biggest perks of developing a PLF concept is the ability not only to create additional price points for patrons but to keep a greater share of that premium in house. Goodrich, for example, offers a variable surcharge ranging from $1.50 to $2 for 2D films and up to $2.50 for 3D releases. “From a business perspective, we want to have multiple levels of theaters so that we can price discriminate,” says Cinergy’s Benson. “Some people have a higher willingness to spend money and thus don’t mind paying a couple of dollars extra for the premium experience, whereas others are more money conscious and prefer the normal or traditional screens. Thus a PLF screen, in our judgment, is smart to offer to the market.”

Marcus Theatres finished 2015 with a strong push in the PLF space, opening 17 newly renovated auditoriums at 11 locations by mid-December—increasing its total PLF count to 42 screens at more than 61 percent of its locations. Rolando B. Rodriguez, CEO of Marcus Theatres, calls PLF’s role in upcoming renovations “a top priority,” and it’s easy to understand why: having the 2015 renovations ready by mid-December coincided with the premiere of Star Wars: The Force Awakens, which netted 40 percent of advanced sales at the circuit’s PLF-equipped locations. When factoring in premium pricing at DLX locations—an average of $3.50 for UltraScreen DLX auditoriums and $2.50 for SuperScreen DLX auditoriums—the midwestern circuit’s bet on the big screens speaks for itself.

Some exhibitors, as is the case with Showbiz Cinemas, have emphasized their commitment to their in-house PLF brand by deciding not to carry IMAX screens in their locations. This hasn’t been the case across the board, especially when it comes to larger circuits. Regal, for example, showed a nearly even split between its two brands, boasting 87 IMAX screens and 89 of their own RPX auditoriums as of late 2015. Similarly, Carmike Cinemas operates a total of 54 PLF auditoriums across its 275 locations nationwide: 31 under its proprietary BigD brand, 21 through IMAX, and 2 MuviXL screens. In a call with investors, Carmike’s CFO, Richard B. Hare, said it was a “market-by-market decision” when determining between a new IMAX location or their own BigD screen. “We sit down, look at it internally, and then we talk to IMAX as well to see if it makes sense and if an IMAX screen is actually available in that market or not.” Carmike featured either BigD auditoriums or IMAX screens in 14 of last year’s new builds according to a 2015 investor presentation.

The advantage of IMAX in this field goes well beyond its tech specs; brand recognition for the format remains high among audiences, known to specifically seek out screenings when purchasing tickets. “IMAX has played such a big role in making the larger screens in multiplexes popular and bringing back the notion of having a really giant screen to play your films on. That has also led to the whole PLF experience,” says James Hyder, editor and publisher of Large Format Examiner, a monthly publication focused on the giant screen market. Even though titles like Everest and The Walk couldn’t benefit from the PLF label, IMAX still saw positive numbers come through with other high-profile releases, most notably Star Wars: The Force Awakens, which grossed more than $200 million worldwide from IMAX alone. International growth for IMAX remains compelling for investors; by mid-February, shares of IMAX China were up 27 percent since the subsidiary’s IPO, an impressive feat considering the recent downturn of the Chinese stock market.

Cinemark is another exhibitor that’s expanded its own proprietary PLF brand while keeping its IMAX screens. With over 200 XD auditoriums across its circuit, Cinemark has grown its PLF brand into the number one private label premium large format in the world. Cinemark charges a $3 premium for 2D titles and $5 for 3D titles in its XD auditoriums, which represent about 3.5 percent of its circuit and are responsible for about 6.5 percent of its 2015 Q3 box office according to a recent call with investors. “It’s been a very, very good investment,” Mark Zoradi, the chain’s recently installed CEO, is quoted as saying in a transcript from the Wedbush California Dreaming Consumer Management Access Brokers Conference this past December. “As we look at it and we look at what’s coming down the road in terms of studio product lineup, we think the XD brand will only get more and more important. We’re going to continue to push that envelope along the way, and we think it will be another pillar in terms of our growth.”

Cinemark’s investment in PLF isn’t finished once an XD screen goes up. Last April, Cinemark announced it would be equipping 20 of its XD auditoriums with RealD’s new GS Cinema System. RealD GS is a projection technology designed to work with either new laser projectors and single or dual Xenon lamp–based digital projectors, delivering high brightness 4K images on screens that may surpass 100 feet in width with a throw ratio of 0.8–1.0.

AMC’s partnership with Dolby shares top billing for the circuit’s own PLF brand, Dolby Cinema at AMC Prime. The circuit already offers Prime auditoriums at more than a dozen locations in the U.S., with six more sites planned in the coming months. Dolby Cinema worked well enough in the U.S. for AMC’s parent company, Wanda Group, to announce its deployment at 100 of its Wanda Cinema Line locations in China. China’s giant screen market has also been a source of growth for RealD and its recently launched RealD LUXE concept. LUXE is slated to debut across three Cinema Palace locations in China this year, complementing its existing presence across various sites in Russia.

The international market has given multinational exhibitors an opportunity to further develop their PLF concepts before launching them in North America. National Amusements’ Showcase Cinemas introduced its Showcase XPlus auditoriums in late 2013, following their rollout in Brazil earlier that year. National Amusements now operates six Showcase Plus auditoriums in the U.S., with an additional eight in Brazil and nine in the U.K. Reading International’s PLF concept, Titan XC, has a bigger presence in Australia and New Zealand but is now available in Hawaii—its first U.S. location, soon to be followed by additional screens in California. John Sittig, director of projection and sound at Reading Cinemas, notes that the circuit’s PLF auditoriums have been over-performing against screens of a similar capacity at the same sites. “Most of our locations have another auditorium of equal capacity, usually around 500 seats, but it is the Titan screen that leads the way in ticket sales on the same film.”

Immersive large screen formats from CJ CGV and Barco have also begun to pick up traction outside the United States. Barco’s Escape format, three screens that link together to form a triptych inside an auditorium, closed 2015 with more than 20 theaters in the U.S., Europe, Mexico, and China. Barco expects to boost that number in 2016 with plans to reach more than 150 screens by year end. ScreenX, a similar take on the concept, offering a 270-degree viewing environment, launched in 2012 at CGV locations in South Korea. ScreenX has since grown its footprint in Asia, tallying 75 screens at 44 sites, and welcoming its first U.S. location in Los Angeles earlier this year.

Escape and ScreenX are visibly different than any other large screen format on the market, which might translate into a slower expansion in North America as exhibitors and consumers alike get used to the offering. “It’s always the trouble, and the people in the giant screen world know this, to start up a new kind of exhibition system. It’s the old chicken-or-the-egg problem; you build a new kind of theater—whether it’s Cinerama in the ’50s or IMAX in the ’70s, or ScreenX or Escape now—and you get into the problem where people won’t make films unless there’s a theater to show it in, but no one will make theaters if there are no movies to show in them,” explains Large Format Examiner’s Hyder.

Hyder’s point applies beyond Barco and CJ CGV’s immersive screens. The support of the creative community can be crucial for the success of any new format, especially those that come with premium ticket prices. IMAX and 3D releases have been able to market film releases from directors that embrace those formats, and there have already been examples of major films—The Maze Runner for Escape and Korean film The Himalayas for ScreenX—that have embraced the creative potential of an immersive screen. The push to a fully immersive cinema experience is going beyond screen and sound formats like Dolby Atmos and Barco Auro, thanks to seating providers like D-Box, MediaMation, and 4DX. As with many other innovations, international audiences are better acquainted with these immersive seating formats, but there has been a recent surge in interest from North America. D-Box increased its screen count by more than 25 percent in the last quarter of 2015, going from 420 screens in September to 528 by the end of the year. An agreement with Cinemark is responsible for a chunk of the new business, with a commitment to install D-Box seats in at least 80 new screens in 40 theaters in the coming 24 months. “The best reference you can have with any technology on the market is if people come back and buy tickets, and right now what we’re seeing is that it’s becoming a bit of a customer-loyalty factor. That’s why Cinemark is adding so many of our seats right now. It doesn’t need to be in downtown New York; we’ve had great success in Pharr, Texas, suburbs of Washington. D.C., and Redwood City—right in the middle of San Jose and San Francisco, in the outskirts of L.A.,” says Michel Paquette, vice president of marketing at D-Box. “And that’s only in the U.S.—in Canada, Cineplex is adding even more.”

In fact, D-Box is one of several premium movie experiences offered by Cineplex, a list that also includes their own PLF concept, UltraAVX. Premium experiences account for nearly 40 percent of the leading Canadian circuit’s annual box office revenue, an element that D-Box’s Paquette cites as his company’s go-to-market strategy. “Originally, back in 2009, the message was that immersive seating was going to help bring the customer back. In hindsight we can’t really say that’s our key go-to-market element. Our message today is that if people are already coming in, they’ll be happy to pay a premium, and our research is showing that it also helps concessions sales.” UltraAVX is a big part of Cineplex’s focus on premium experience. The Canadian circuit finished the year with 80 of its own PLF auditoriums and plans to increase that figure in 2016. “Our strategy is to continue adding UltraAVX auditoriums to new and existing Cineplex theaters in large and mid-size markets across [Canada], bringing this incredible moviegoing experience to our guests coast to coast,” says Sarah Van Lange, director of communications at Cineplex Entertainment.

Immersive screens and seats rank among the more notable elements in the continuing evolution of PLF auditoriums, but Texas-based Santikos Theatres decided to take a different route to updating their AVX auditoriums, their PLF offering that was launched in 2012. “The next evolution of our growth is to upgrade from Barco 4K Projection to Barco Digital Laser Projection in our AVX auditoriums,” says David Holmes, CEO of Santikos Enterprises “This will keep us aligned with the Santikos spirit of innovation when we open the Santikos Casablanca, the world’s first all-digital laser projection theater, which will include two auditoriums that will showcase the opulence of AVX.”

Whereas the consumer attention of premium large format auditoriums might focus more on the “large” aspects of the big screen, today’s exhibition market confirms that the “premium” part of the equation is equally as important. 2015 brought more screens in more locations—a reflection of exhibitors’ faith in the concept. Whatever becomes the next big evolution for premium large format theaters, the next big thing is likely to come close on its heels.